The main objective of the report is to know the overall operations of the Loan Operation Department and also the Loan Recovery Department of Bangladesh Development Bank Limited. Other objectives are to know about the loan operation and recovery process. Find out the reason of sick project and find the strengths of BDBL. Finally determine the limitations and problem practically involved in operation of BDBL and recommend probable ways to minimize the problem.
Objective of the Study
The main objective of the report is to know the overall operations of the Loan Operation Department and also the Loan Recovery Department of Bangladesh Development Bank Limited (BDBL)
- To get a brief overview of Banking sector in Bangladesh
- To get a brief overview of Bangladesh Development Bank Limited (BDBL).
- To know about various services of this bank.
- To know the role of BDBL in stimulating industrial sector.
- To know about the loan operation and recovery process.
- To find out the reason of sick project.
- To find the strengths of BDBL.
- To determine the limitations and problem practically involved in operation of BDBL.
- To recommend probable ways to minimize the problem.
This report has been prepared on the basis of experience gathered during the period of internship and by oral interviewing the responsible officers. For preparing this report, I have also get information from annual report and website of the Bangladesh Development Bank Limited (BDBL). I have presented my experience and finding by using different charts and tables, which are presented in the analysis part.
As the topic of my internship report is ‘Rehabilitation of Sick Industries of Bangladesh Development Bank Limited (BDBL)’and so I was going to prepare my report in the head office of BDBL, BDBL Bhaban, 8, Rajuk Avenue, Dhaka-1000. So the sample size will be limited only within the respective departments of this bank.
The information and data for this report have been collected from both the primary and secondary sources.
- Personal observation by investigations of different records, papers, documents, etc.
- Formal and informal conversation with bank officers and staff.
- Relevant documents, different manuals, register and brochures maintained by the bank.
- Annual report of BDBL
- Different papers and document of BDBL
- Monthly performance report of BDBL
- BDBL website.
Methods of data collection and data collection instruments used
There are so many methods of data collection which was relevant and important for the study. Basically two methods has been used in this report, these are as follows:
- Interview Method
- Observation Method
Relevant data for this report has been collected primarily by direct investigations of different records, papers, documents, operational process and different personnel. The interviews were administered by formal and informal discussion. No structured questionnaire has been used. Information regarding office activities of the bank has been collected through consulting bank records and discussion with bank personnel.
Data processing and analysis
Data collected from secondary sources have been processed manually and qualitative approach has been used through the study. Qualitative approach has been adopted for data analysis and interpretation taking the processed data as the base. So the report relies primarily on an analytical judgment and critical reasoning.
Overview of Bangladesh Development Bank Limited
Non- Bengali entrepreneurs and the public sector nearly monopolized economic activity in Pakistan era. Of the very few business professionals are active in East Pakistan fewer yet survived after the war. Post independence Bangladesh therefore presented a unique set of opportunities and the problems for the private sector. The good news was that without the stranglehold of the elite Pakistan business family the field was wide open for the development of a homegrown Bengali private sector, but that both a capital base and an entirely new entrepreneurial class would have to be development out of an economic vacuum.
Capital formation rapidly occurred and the newly nationalized banks found themselves with serious asset management problem because there were few professional entrepreneurial risk takers with business skills and proven track records to which this capital could be made available under normal and prudent banking practice.
Under this sort of circumstances, the former Industrial Development Bank of Pakistan (IDBP) and the Equity Participation Fund (EDF) both of which were established for the industrial development of Pakistan were converted into singles institution named Bangladesh Shilpa Bank come to existence on October 31, 1972 by the promulgation of Bangladesh Shilpa Bank order 1972 (president’s order no 129 of 1972). The BSB order, 1972 was amended subsequently by the parliament to provide more operational autonomy to its management.
BSB & BSRS have played an important role for industrializing the country from 1972 to 31 November 2009. At present in rival banking sector, there is no substitute way without making versatility in the customer service along with long term loan facilities. It is hoped that by joining this two institutions via lending activity by making BDBL to achieve Economies of scale to spread market boundary to increase rivalry & liquid State of money will be sustainable.
BDBL has been established to give short term & long term loan for the development of communication & utility, to develop infrastructural facilities & to keep role in international business according to company’s act 1991. It is not only a development bank but also a commercial bank. So it would execute its activities under the company’s law &banking companies act.
Bangladesh Development Bank Limited (BDBL) is fully state owned commercial Bank of Bangladesh. BDBL has been created through the merger Bangladesh Shilpa Bank (BSB) & Bangladesh Shilpa Rin Songstha (BSRS), signing vendor’s agreement among the Government & Government nominated executive board of directors at 21 December 2009. The assets, manpower and loan of dissolved institutions have been assigned to new organization of BDBL. BDBL has been enlisted to the register of joint stock companies and certificate of incorporation and certificate of commencement of business has been issued by the register of joint stock companies. Bangladesh Bank has issued a banking license to BDBL.
Vision of BDBL
To emerge as the country prime financial institution for supporting private sector industrial and other projects of great significance to the country’s economic development. Also be active in commercial banking by introducing new lines of product and providing excellent services to the customers.
Mission of BDBL
- To be compete with other banks &Financial institutions in rendering services
- To contribute to the country’s socio economic development by identifying new profitable areas for investment.
- To mobilize deposit for productive investment.
- To expand branch network in commercially & geographically important places.
- To employ quality human resources &enhance their capability through motivation & right type of training at home &abroad.
- To delegate maximum authority ensuring proper accountability.
- To maintain continuous improvement & up gradation in business polices & procedures.
- To adopt &adapt new technology.
- To maximize profit by strong, efficient & prudent financial performance &
- To introduce new product lines according to new market needs.
Strategic priorities of BDBL
- Bangladesh Development Bank Limited invest in Eco-friendly industries that help mitigate environment degradation by lending more for renewable energy and effluent treatment plants another project that employ energy efficient low-emission technologies including agro- based industries, small power project, ICT , transport and infrastructure projects.
- BDBL select and invest industrial projects where locating advantages like local availability of raw material, good infrastructural facilities (road construction, road communication and transport facilities) and utilities (power, gas, water etc.) shall be available.
- Project loans of BDBL are restricted to TK.15 core maximum and TK. 2 core minimum (for large Project). It arranges and participates in syndicated loan for projects above TK.15 core.
- BDBL identify prospective and potential entrepreneurs and investors or clients and motivate, guide and help them select profitable industrial ventures for investment.
- Economic and research department publish financial disclosures regularly.
- It undertakes from time to time SWOT analysis for reviewing bank’s market position.
Values of BDBL
- Customer focus- provides smart, efficient, transparent and courteous services.
- Social responsibilities- practice corporate social responsibility.
Functions of BDBL:
BDBL extends term loan facilities in local and foreign currencies to industrial projects (both new and BMRE) in the private and public sectors. Besides Bank also performs the following activities:
- Provides working capital loans to industrial projects;
- Provides equity support in the form of underwriting and bridge finance to public limited companies
- Issues guarantees on behalf of borrowers for repayment of loan;
- Extend commercials banking services along with deposit mobilization;
- Purchases and sales shares/securities for BDBL and on behalf of customers as member of Dhaka Stock Exchange (DSE) Ltd. and Chittagong Stock Exchange (CSE) Ltd. for capital market development; and
- Conducts projects promotional activities along with preparation of various sub-sector study reports.
What Do We Mean by Sick Industry?
Industrialization is the concern of all the economic, especially in developing countries. Since the independence numerous political and effects have been made to accelerate the pace of industrialization in Bangladesh. Bangladesh government has established specialized financial institution named Bangladesh Development Bank Ltd. on 31st October 1972 with the view to providing long term and intermediate term loan to the entrepreneurs for assistance and equity support.
At the very beginning Bangladesh Development Bank Ltd, it was the only institution without whose support industrial project was impossible to build up. About the entire industrial unit established up to 1991is the output of development bank. It is the bank whose main objective is to encourage and motivate the potential entrepreneur to set up the new industry in the various part of the country. Although some commercial banks are providing short as well long term industrial support to potential entrepreneurs, but still, Bangladesh Development Bank Ltd, is on the contributes of BDBL is incomparable.
Bangladesh Development Bank Ltd undertakes various project by providing finance, machinery and other aids, some projects are implemented successfully and some projects are failed to attain the goal and these firms are called sick industries according to the BDBL language. Sick industries mean the industries, which become stuck –up during construction or could not operate successfully after implementation. This project could either pay back the banks dues or make any contribution to the national economy. These project identified as sick industries due to there inability to generate sufficient fund for debt servicing. There are so many sick industries in Bangladesh, which has no specific statistical data. Here the main objective is to identify the causes of this industry
Sick Situation of an Industry
Normally BDBL meets the long-term credit needs for implementation of the projects. BDBL charter provides for extending working capital to its financed project only to a limited scale. While sanctioning loans by BDBL provision is made for commercial banks to provide 70% of the working capital needs. But in most cases it is found that the project management either can’t raise the required working capital from the commercial banks, or they can’t raise required amount in due time. As a result this project could not go into operation on schedule time and they become unable to pay the interest and the principal amount. At last they are treated as sick industry.
Identified Sick Industries
In Bangladesh there are so many sick industries. The sick industry concept is not the newest one. It is occurring form the pre-independence of Bangladesh and Bangladesh inherent some sick industries from its birth. After independence this is also continuing. The exact figure of sick industry is not identified
Some sick industries
|G.M.K. Textile Ltd||Ali& Sons Ltd.||Malik Aoto Rice Mill|
|Meraj Fabrics Ltd.||Sharder Corp[oration Mills Ltd.||Al-Amin Lee Factory|
|Jahan Grope of printing & packaging||Nima Corporation Ltd||United Company|
|Al-Amin printing & packaging||J.K.K. Industry Ltd||Mitaly Enterprise Pvt. Ltd|
|Riad products pvt.ltd||Grand Dhaka Hotel Pvt. Ltd.||Helal Engineering Pvt. Ltd.|
|Tas Toys pbt. ltd||Hotel konic Pvt. Ltd.||Quick Carrier Ltd.|
|Micro Aliment manufacturing co. ltd||Toronody Water Ways Pvt. Ltd.||Tempkul Ltd.|
|Hasan Agro Engineering Workshop ltd||Companygonj Rubber Industry||Tito Textile Ltd.|
|Pioneer Iron foundry Engineering||Padma Tyre Reterding industry||Brick Linker Ltd.|
|Diamond industry pvt. ltd||Shovo auto rice industry ltd||Nakko Icc Ltd.|
|Jahanara Maaudling & Engineering Workshop||South East Enterprise||Oriental Foundry|
|Allama Nails Allied industry pvt. Ltd.||Coxbazer Aqure Resources||Khan & khan industry|
|North Bengle Silcate Industry pvt. Ltd||Altaf Rice mills||Uttaran Engineering Complex|
|Noor Cold Storage|
Rang pur Poly Com.
|Mocca Mills Ltd.|
Source: Manual of project rehabilitation department
Impact of Sick industry in Bangladesh & BDBL.
- Increase of non-performing assets in organizational level as well as national level
- Decrease contribution in GDP and GNP
- Decrease in productivity at national level
- Average effect in banks profitability
- Increases the classified loan
- Increase the lending rate of interest, which adversely affect the new and regular borrowers
- Affects adversely in the economic growth rate of the country
- Create adverse psychological impact on the prospective entrepreneurs.
During FY 2009-10 loan liabilities of 41 projects were liquidated and 14 new projects were included in the Bank’s loan portfolio. As on 30th June, 2010 total number of projects in the loan portfolio stood at 166 with a total loan outstanding of TK 7441.91 million compared to that of 308 projects having a total loan outstanding of TK 13998.11 million in the preceding year. Out of.166 projects in the loan portfolio, 60 were exported-oriented, 72 import-substituting and 14 services-other industries.
SECTOR-WISE POSITION OF BANKS LOAN PORTFOLIO
(AS ON 30-06-2007)
|Sector||No of projects||Total loan outstanding (million taka)|
|Food & Allied product||31||491|
|Jute & Allied product||3||538|
|Cotton, Woolen & Synthetic Textile||53||5304|
|Paper, paper product & printing||6||177|
|Tannery & wooden product||4||100|
|Non Metallic mineral products||2||100|
|Forest & wooden product||1||7|
|Rubber & rubber product||0||0|
|Basic metal product||1||2|
|Electronic machinery & goods||0||0|
|Machinery & spare||6||45|
|Chemical & pharmaceuticals||15||198|
|Petro Chemical product||5||133|
|Total BDBL projects||163||7442|
|Total BSCIC sponsored projects||3||0|
Loan recovered is a crucial index to measure the success of a lending organization. Like previous years, this too, the bank has strengthened its recovery drive for realizing loans and dues from its borrowers and significant success was achieved. Total recovery target of loans during the FY 2009-10 was TK. 1400.00 million against which actual cash recovery was TK. 1391.44 million constituting 99 per cent of the target During the reporting year, outstanding loan of TK. 259.48 was regularized through rescheduling and replacement of bad and doubtful loan accounts. The amount regularized through cash recovery and rescheduling were TK 1124.20 million and TK. 149.40 million respectively in FY 2008-09. During FY 2009-10, the recovery drive was affected to some extent, among others, due to the ever memorable serious flood the country experienced. During 2009-10 the percentage of classified loan stood at 41% with a 21% decrease overthe62% of the preceding year. In other words with a decrease of TK. 6359.69 million during reporting year, the classified amount of loan stood at TK. 3664.71 million from TK. 10042.40 million in the previous.
RECOVERY OF LOAN
|CATEGORY OF LOAN||AMOUNT RECOVERY(million Taka)|
|Long term loans:|
Long term project loans
|Short term loan: Working capital loans Others(Debenture /Share/loans FDR/write off)||27|
|Grand Total (A+B)||1124||1391|
Legal Actions Taken Recovery of Loan:
The Bank initiates legal actions under the BDBL order 1972 and Author Rin Adalat Aien-2003 against those defaulting and recalcitrant borrowers who fail to come up with any satisfactory proposal for settlement of Banks dues after all normal recovery efforts have been exhausted.
In FY 2009-2010, legal notices were issued against 33 defaulting companies for recovery of Bank’s dues while law suits were filed against 11 companies. Besides, 79 sale notices were published in the national dailies for auction. At the same time efforts were made for settlement of disputes outside the court through negotiation. As a result, 23 litigated companies settled the disputes outside the court and assets of 11 projects were sold through auction during the year.
Loan written off:
During FY2009-10 the bank had written off a total loan liability of TK. 6155.28.million of 171 projects. Out of which 116 for long term, 52 for bridge & 3 for short term Loan.
The bank is primarily subject to interest rate, credit and currency risks. The policies and procedures for managing these risks are outlined in the notes below. The bank has designed and implemented a framework of controls to identify, monitor and manage these risks, which are as follows:
Credit Risk Management
Credit risk is the risk that one party to a financial instrument will fail to discharge and obligation and cause the other party to incur a financial loss. Concentration of credit risk arises when a number of counter parts are engaged in similar business activities or activities in the same geographical region or have similar economic features that would cause their ability to met contractual obligations to be similarly affected by changes in economic, political or other conditions.
Concentraton Of Credit Risk (Crm)
Out of the total financial assets of TK.8911 million, the financial assets that were subject to credit risk associated to total credit. The bank’s major credit risk is concentrated in textile sector. To manage credit risk, the bank applies credit limits to its customers and obtains adequate collaterals.
Credit risk is the risk the one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk in the Bangladesh Development Bank Limited portfolio is mentored, reviewed and analyzed by the Credit Risk Management (CRM).
CRM determines the quality of the credit portfolio and assists in minimizing potential losses. To achieve this objective, CRM formulates appropriate credit policies and procedures for the bank to ensure building and maintaining quality credits and an efficient credit process.
Bangladesh Development Bank Limited has formed Asset Liabilities Committee (ALCO) to screen out the banks / financial institutions and determine and controls cross border / country risk.
To manage the Non-perfuming Loans (NPLs), Bangladesh Development Bank Limited has in place comprehensive remedial management policy, which includes a framework of controls to identify weak credits and monitoring of these accounts.
Intrerst Rate Risk Management
Interest risk is the risk that the value of a financial instrument will fluctuate due to changes in the market interest rates. The risks are inherent on deposits, liabilities, loans/advances and investment of the Bank.
The Assets and Liabilities Committee of Bangladesh Development Bank Limited regularly reviews the total portfolio of the bank to ensure that risks are minimized and remain within acceptable limits.
Liquidity Risk Management
Liquidity risk is defined as potential loss arising from the Bank’s inability to meet its contractual obligations when due. Liquidity risk arises in the general funding of the Bank’s activities and in the management of its assets. Bank maintains sufficient liquidity to fund its day to day operations, meet customers deposit withdrawals either on demand or at contractual maturity meet customers demand for new loans participate in new investments when opportunities arise and repay borrowing they mature. Hence liquidity is maintained to meet knows as well as unanticipated cash funding need.
Important factors in assuring liquidity are funded on the Band’s good reputation, the strength of its strong financial position and credit rating. Liquidity risk is managed in accordance with a framework of liquidity polices, contracts and limits approve by ALCO. These polices controls and limits to ensure that Bank maintains well diversified sources of funding as well sufficient liquidity to meet all its contractual obligations when due.
The bank can meet the liquidity crisis by taking call loan, short term deposit from other Bank and Financial Institutions.
A case study about Sick Industry
NAME AND LOCATION OF THE PROJECT
M/S J.K.K Industries Limited
11, DARUS SALAM MIRPUR DHAKA .L
Head Office: Paribahan Bhaban,
21, Rajuk Avenue Dhaka.
BOARD OF DIRECTORS
Borrowers and their net worth (Position as on: October-1990)
|SL||Name of Father’s Name||Designation||Taka in Lac|
|Immovable assets||Investment||Liabilities||Net worth|
|MD. SIDDIQUR BHUIYAN Father: Late Mojibur Rahaman||Managing director||18.30||2.00||–||–|
|MD. ABU AHMED JAGAUL Father: Late Dr Faziul Karim||Director||0.75||–||–||–|
Classification of project and production capacity:
The project wanted to produce various types of zipper
Project Execution and Implementation
The construction period for the project was 8 months. The wanted to go in production in September 1992. But the company could not go in production by January 1994- Which was time for repayment of loan. As the imported machinery were identified as unable to produce good quality of zipper. The entrepreneurs could not go for commercial production.
|Sector & product mix||Sector||Tick||Product Mix|
Securities against BDBL’s Loan (Position as on 19-12-93)
|Description of sefurity||Value in ”lac”|
|a. Loan with area|
Credit Information Board (CIB) On Director’s Credit Exposure (Position as on 30-06-99)
|Name of business Concern||Nature of loan||Date of Sanction||Date of Expire||Taka lac||Over due|
|J.K.K Industries limited||Trem loan||2-11-90||01-07-04||27||15|
Types of loan
|Type of loan||Sanction|
|(A) Term loan||01-12-09||18.07||2104-92||21.15|
|(B) Cash Credit|
|Type of loan||Total amount paid so far||Amount of last payment & date|
|A. term loan||12.64||0.5 lack Date: 05-04-99|
|B. Cash eredit|
Position of loan A/C S (As on 01-01-99)
|Item||Taka in Lac||Grand|
|Not due||Over due||total|
|Others if any||0.04||0.04||0.04|
Provision (As on 31-12-98) Including Cash Credit
|Item||Taka in lack|
(A) Down Payment
(a) Required tk——————–lack
(b) Deposited tk——————-lack
(c) Shortfall tk——————–lack
(B) Reasons for short fall:
The company could not paid any down payment because the borrowing company could not start their commercial operation to the specified period.
(C) General remarks if any:
The company could not start their production for the problem of machinery so that it could be consider as sick industry.
(D) Steps taken to recover the loan by BDBL
- To recover the loan, the bank will exert continuous pressure on all companies director.
- The borrowing company paid loan to the BSB from other sources of income i.e. trading business.
- Because the loan borrowing company was not sincere to refund the loan. So a notice was served on the company on 30-06-99.
- The loan amount which was paid by the loan borrowing company after deducting the principal amount, the rest of the amount could be paid within 90 days.
- Recommendation of the special committee of BSB for waiver of interest.
(E) Circumstance under Which Rebate facilities had been allowed:
(1) They could not go for operation in spite of assembling machinery in the factory.
(2) The import machinery was identified as unable to produce good quality of zipper
(3) The imported machinery was considered as obsolete.
(4) The borrowers were inclined to repay the loan from their personnel sources in accordance with recommendation of special committee for waiver interest.
(5) The subsidies of taka 15.36 lacks will be received from the government.
The estimated value of the assets of the project was taka 8 lack to 10 lack on 19-10-99.
(F) Statement of Outstanding Loan:
|Types||Amount (in Lackh)|
|A). Long term loan:|
|Non expired loan||12.18|
|B) Expired Loan|
|Total expired Loan||27.09|
|Total (long and expired Loan)||39.25|
(G) Loan Repayment Schedule
M/S.J.KK. Industries Limited
(H) Loan Repayment Schedule
(1) Interest will not be imposed on the company’s loan a/c 01-10-2000.
(2) The loan will be refused CY 10, three monthly installments of which the first 9 installments amounting to taka 2.12 lacks and the last installment amounting to taka 2.08 lacks. The date or first installment is 31-06-2003 and the date of last installment is 30-06-2003.
(3) If the company failed to repay any of 2 installments then the rebate facilities will cancelled.
(4) Approval of bank is to be taken to sell the assets of the project and the selling price will have to deposit to the bank.
(5) If any of installments is delayed for sometimes the interest will be charged for that delayed period.
(6) At last the loan amount of the company will have to be liquated.
But the borrowing company could not pay the loan amount within the specified period. The loan repayment facility extended by the BDBL from 30-06-2003 to 30-04-2004 by the two installments. The borrowing company paid the last installment on 17-06-2004. Finally Board of Directors meetings took the decision to refund their documents against the loan provided by Bangladesh Development.
The recommendation to various behind the sickness from my point of view is as follows
(1) There are various reasons behind the sickness of the project. To identify the reasons why the project is sick.
(2) Some employees are involved to sanction the loan to the entrepreneur. To identify employee who is liable for this sick project.
(3) Proper punishment should be given to the liable person. Otherwise they could not change their nature.
(4) Properly cheek the feasibility report before issuing loan.
(5) There are various politics, rules and regulations are exciting in the BDBL. proper policy to be adopted and implemented.
(6) Project must be scrutinized in and appropriate manner.
(7) Political pressure should be ignored.
(8) BDBL should give more consideration physical investigation before issuing loan.
Rehabilitation of Sick Industry
Rehabilitation means to reshape the existing Industries or projects so that it may operate successfully in future. Keeping it mind I tried my best to find the appropriate way to rehabilitate a sic industry.
Programs Taken to Rehabilitate the Sick Industries
BDBL has taken the following programs during the year 2009-2010
- Deferred payment of IDCF (Interest during construction period) after some moratorium period in installments.
- Regular lone repaying projects are honored with special certificates and BDBL crests.
- Problem project are given waiver of interest. Replacement/rescheduling block account Injections for easy repayment of banks lone.
- Injection of additional funds.
- Balancing and modernizing of machinery
- Product diversification
- Strengthening or changing the project management
- Restructuring of lone accounts with transferring part of loans/Interest feed block account.
Facilities provided Under Rehabilitation Program
|Loan Sanction||TK. In Lace|
|BDBL had giving loan at the first time|
Under rehabilitation programs:
Long term loan
All sick industries are not rehabilitated because all the sick industry has not all possibilities to rehabilitate. Its mainly depends on the nature of the sickness. The sick industries that is probable to rehabilitate by providing and assistant some predefined criterion. The predefining criterions are based particularly on:
- Management perspective
- Technological perspective and
- Financial perspective
In the case of rehabilitating sick and industries the bank take different polices on situation which are given as bellows.
Management of the project should measure the aggregate demand of product or the project and also maintain the market share. Consumption trends and production are to measure for rehabilitation a sick Industry. If the bank through that a little change in the managing committee would reestablish the project then they make a change in the managing committee.
- Technological Perspectives
Whether the raw materials and technological is available or not that must be measures in the form of price quantity. If they through that some technological change would reestablish the project they make some technological change.
- Financial Perspective
In the financial measurement the project should compute the cost of capital and maintain budgeting. The present value of the net cash inflow should be higher than the present value of the outflow. In such re-phased or providing consulting service, i.e.
- Success about the proper way
- Inspiration by providing motivation
after considering an industry as sick, then the industry is the into rehabilitation by aiding above additional support of those sick Industry that can recovers the additional investment then it seems terrible decision because of some political pressure.
- Marketing Perspective
The employees of project rehabilitation department are employed in this case. Value delivery sequence of project rehabilitation Department is shown below-
Choose the value
Segmentation the reasons of sickness
The causes behind sick industries are discussed below-
- Shortage or working capital
- Lank of marketing knowledge
- Administrative and managerial inefficiencies
- Present economic situation of home and abroad
- Political condition
- Other reasons behind sickness
Targeting to rehabilitate
- Management perspective
- Technical perspective and
- Financial perspective
Posting in the Market
BDBL rehabilitates are the sick industries of their financed projects.
Provide the value
Their products are –
- Supporting the management
- Providing the working capital
- Technological enrichment
Their products are –
- Debt relief
- Injection of additional funds
- Direct management
Communicate the value
The personal of project Rehabilitation Department are employed for this purpose.
Role of Management of Rehabilitation Department of BDBL
Bangladesh Development Bank Limited was established to stimulate industrialization in the country. So, it financed in various types of industries. The industries on which it financed, all are not a successful one. Some of them have failed to gain success and identified as a sick industry. Sickness of particular project. Sometimes they reschedule lone according to the capabilities of run the business more effectively; sufficient return may gain and contribute to the economy. If the project is to rehabilitate, send to the law department and finally sued against the project. The main activates of rehabilitation department are as follows-
- The department primarily selects a sick project. PID investigates the project and find out cause of sickness and formed a committee to investigate the project. Then it is taken to be considered for rehabilitation. After considering it as a rehabilitation consultant.
- Take necessary action to rehabilitate sick project after appropriate investigation.
- Take steps about rehabilitation document examination, recommendation preparation implementation and activation of plane.
- Confirmation about project profitability
- Take necessary steps about production marketing of product and loan repayment.
- Duties give up to the third party or previous management after successful managing of the project.
- Managing and directing recommendation preparation about take over project.
- Analyze and compare the production marketing and recovery of the rehabilitation project and take appropriate action according.
- When there is scope to rehabilitate a project, document Tranter to law department to take further.
Are All-Sick Industries Are Rehabilitated?
All sick industries are not rehabilitating because the all-sick have not all possibility to rehabilitate. Its mainly depends on the nature of sickness. The sick industry which is probable to rehabilitate by providing and assisting the following supports.
Which Industries are Rehabilitated and Which Industries are not rehabilitated?
(A) Sick industries, which are rehabilitable
- Changing of management structure
- Providing financial aids or loan without interest or lower rate interest
- Financial treatment that the amount of interest is to be released
- Assisting fir replacement of machine
- Rehabilitation is sometimes depending on merit of the project
- Providing consulting service
- Success about the proper way
- Inspiration by providing motivation
(B) Sick industries, which are not rehabilitable
After consideration a firm as sick, then the firms are taken into rehabilitation by aiding above additional support of those the sick firm that can recover the additional investment then seems to be as rehabilitated firm otherwise.
- Relationship between Appraisal Practices Monitoring and Sickness.
These three things are very much interrelated. A project goes into sickness due to inappropriate appraisal practice and monitoring. The linkage among them is discussed below-
(A) Appraisal Practice
Appraisal practice that are done from the five aspects such as
- Management aspect
- Technical aspect
- Financial aspect
- Economic aspect
Where the project is feasible or not form the above mentioned perspective of aspects.
Monitoring is supervising and control after the implementation of during the implementation of the project. The monitoring from the viewpoint of the bank is to proper utilization of loans and recover the loan payment with due time.
When monitoring and appraisal is not accomplished properly then the project fall in sickness. So project implementation that depends on appropriate monitoring and appraisal practice.
The BDBL also puts realistic efforts to rehabilitate is sick, problem-ridden and stuck-up projects. In this perspective BSB has taken three-dimensional measures comprising of
- Debt relief
- Injection of additional funds
- Direct management.
The bank for rehabilitation of sick-projects took these three steps. It is mentionable that with a view to making such projects capable to debt servicing through profitable including a financial package.
The bank has no far rehabilitated 53 such projects is already mentioned in the sick industry chapter of this report. A summarized position of the facilities extended under its rehabilitation program is shown below.
|Types of facilities||Amount involved (million taka)|
|Interest Waiver allowed||880|
|Block Account Facility Provided||456|
The bank also makes a program of taking over management of the sick projects directly where the above measures were not considered sufficient due to inefficient management/mismanagement. So they created a department called “Sick Projects. The responsibility of this department is to make such sanctioning of term loans during FY2008-2009. This year local currency loan of TK. 989 million, which was sanctioned to 27 projects. Of the total sanctioned amount TK. 687 million was for 21 new projects and an additional loan of 302 million was for on going projects including 3 for BMkRE.
Under rehabilitation program BDBL has taken so many measures to rehabilitate the sick industries. Summarized measures that are taken by BDBL to rehabilitate the sick are given below-
Measures Taken by BDBL
|Loan outstanding (Million TK)|
|Overdue||Total outstanding||Projects||Replacement||Waive r Interest||Block A/C||Additional loans||Working capital||Equity participation|
Source: Project rehabilitation department of BDBL
Note: Parentheses indicate member of projects
Findings, recommendation & conclusion
Bangladesh Development Bank Limited plays vital role for industrialization as a developed financial institution. DBBL is continuing its bolstering for up –gradation of our economy. Although there are a lot of favorable and strengthen position of BDBL in respect of its actives. Nerveless BDNL has some drawbacks that are responsible for huge amount of losses each year. BDBL should overcome such problem as early as possible to become a profitable one. One important problem of BDBL is that it is a decentralized and each department as responsible for particular activities but they have lack of coordination to achieved the central objectives. We observed a large number of projects are sick and they are loan defaults. For that I criticize the loan appraisal procedure because it is the vital documents for loan issue. In this situation I recommended some points that will help BDBL to overcome of this problem.
Finding of the Report
During the internship program the following findings have been found out from my study.
- Sometimes improper feasibility reports are submitted by sponsors, which do not contain adequate and reliable information.
- The employee’s are divided into two sides of BSB & BSRS
- The former employees of BSRS Think that they had more asset and less liabilities than BSB
- Sometimes pressure group involvement in sanctioning loan
- Lack of business experience of entrepreneurs. So when they start business they may be failure in business and they may become loan defaulter.
- Lengthy procedure and long time (More than three months) involved in the appraisal of project.
- Lack of adequate, updated and accurate information from the Management information system (MIS)
- Unstable policy of the government due to political changes over time.
- Sometimes inefficient allocations of resources created a huge amount of bad debt.
- Lack of financial commitment on the part of the borrower, the result being the failure of mobilization of equity by them in future means they divert their equity in other purpose after getting the loan amount.
- Lack of effective monitoring in projected work.
- Management conflict is one of another important problem in the situation of sickness.
Lack of motivation and team speed
Lack of proper\scheduling in projected work
Absence of an-up-to-date project appraisal manual, because the present manual was designed 18 years ago. So many aspects should consider which do not cover by the exciting manual.
Dependence on imported technology and non-availability of adequate information about that from local source. Lack of adequate, updated and accurate information in the country. Both primary and secondary data are not readily available. Inadequate attention is paid to analyze risk and an uncertainty associated with the projects, means only sensitivity analysis is done to analysis the risk. There is no system of accountability of the project appraisal team if the approved project fails due to their improper appraisal.
Most of the personal are not as much experienced and skilled to operate banks activities in proper way. Shortage of working capital is another problem because some industry may sick for this problem. Inefficient project cost estimation, not considering inflation, different changes in the cost factors, waste and spoilage, personnel replacement cost etc. As a result sometimes project become sick. Because of country’s existing political instability, unstable tariff and fiscal policy some industries may become sick.
- No use of latest technology and permanent IT specialist.
- Poor quality of local machinery, equipment and \ construction materials is another cause for sickness.
- Lack of co-ordination among various financial institutions in exchange is another cause for sickness.
- Delay in settlement of case.
- Project rehabilitation is one of the criteria of BSB revives the risk project.
Finally contribution of BSB is the highest in the industrializations of Bangladesh through there are some problems.
BDBL is one of the prime development financing institutions in Bangladesh to accelerate the pace of industrialization of the country. It plays significant role in the industrial development of Bangladesh. As a finance institution it has both strength and weakness. Though, it is said that the continuation of BDBL is below the expansion & if fails to achieve the target, at present BDBL has taken so many steps for the expansion of industrial sector development. Today’s base of industrial development is totally based on Bangladesh Development Bank Limited, so by any means we cannot deny the generous contribution of BDBL in the industrial development sector. Since Rehabilitation of sick industries department is the crucial and most important department because this department should be made out of political telephone calls surrenders every rule and policy. If this department could be made separate in performing its job, give this department in private sector, and is paid as per its performance, a good result may come out and the rate of sickness of projects will go down.
Rehabilitation of sick industries department should be made fully computerized and each of the engineers should have a personal computer to do their job promptly and make decision accurately.
Some more technicians and expert engineers should be there to judge project viability accurately Fresh and young generation employee should be appointed in this department who are familiar with the latest technology and literacy.
A regular training program should be launched for each employee from the training department so that the employees keep themselves updated with any change occurred in the field of innovation, technology and edge.
A proper and prompts co-ordination and cooperation environment should be launched so that they work as a team and make the appraisal report promptly to prevent the project to be obsolete. The BSOF from should be more concise and easy for the client to fill it up. A sample of questionnaire is given to the annexure.
Sanctioning of loan to the sponsors should be made through making feasibility report properly.
Loan appraisal procedure is time consuming and to some extent project plan become irrelevant after getting the loan. Since all the process is completed, he is bound to take this loan because some expenditure has already been incurred (sunk cost). As a result loan recovery may slow and sometimes difficult. My suggestion is that BDBL should rearrange appraisal procedure so that the entrepreneurs can take loan within short period of time.
- Experienced and motivated entrepreneurs should be allowed for sanctioning the loan.
- BDBL should avoid unnecessary political interferer. If political problem influences the baking activity must create new problem, no doubt.
- BDBL should avoid unnecessary political interfere. If political problem influence the baking activity must create new problem, no doubt.
- BDBL should give more consideration on physical investigation before issuing loan. However project appraisal should be strict so that nobody cal use its loopholes.
- Some times real entrepreneur does not get bank loan. So actual entrepreneurs should be identified and give loan.
- The projects/industries, which are profitable, should be identified and sanctioned loan to those projects/industries.
- Risk adjusted discount rate method; program evaluation and review technique (PERT) and probability analysis should be introduced.
- Market Research Institution should be established for proper market survey.
- A co-ordination cell should be established for sharing information among various institutions.
Some Other Important Recommendation:
On the basis of interest rate
- No Collateral
- Tolerable interest rate
- No bureaucratic problem
Encouraging existing entrepreneurs
- Awarding the good entrepreneur’s
- Incentives such as lowering interest rate for the existing customer for three better repayment behaviors.
Bangladesh Development Bank limited is a well-known specialized bank of our country. We cannot think industrialization our country without meaningless contribution of Bangladesh Development Bank Limited. BDBL as the prime Development Financing Institution (DFI) of the country extended financial assistance both the local and foreign currencies for setting up new industries BMRE of exciting industries rehabilitation of sick industries. The bank had five division and twenty one departments in its had office located in Dhaka at Motijheel named BDBL Building it prioritizes, especially. Export Oriented/Export Linkage industrial units, Efficient Import Substitution, Bangladesh Development Bank Limited (BDBL) is fully state owned Bank of Bangladesh which came to effective at 3rd January 2010. Bangladesh Shilpa Bank (BSB) and Bangladesh Shilpa Rin Songstha (BSRS) were merging into Bangladesh Development Bank Ltd (BDBL) at 16th November 2009 and come to effective at 3rd January 2010. In additional commercial banking, BDBL provides financial and technical assistance to broaden the private as well as public sector industrial base of the country. Joint Ventures, Commercial banking. BDBL provides financial and technical assistance to broaden the private as well as public sector industrial base of the country. Joint Ventures Commercialization of local technology and promotion of agro-based industry. At present BDBL carefully takes steps for industry essential for employment generation. At present BDBL carefully takes steps for sanctioning loan because of a huge fund become irrecoverable due to sickness of various projects. It is indeed that sickness is consequences of unconscious of unconscious and lack of investigation in case of issue of loan. We know sick project is burden of bank as well as overall economy of Bangladesh. So, now-a-days BDBL is reducing rehabilitation of sick industries. Because those industries, which are unable to pay their previous loan amount, if they are rehabilitation of sick industry and work of this department is decreasing day by day. So I think BDBL will close their rehabilitation to reduce their loss. I think proper scrutinizing of project proposal and careful physical verification may make sure to be profitable of that industry as well as Bangladesh Development Bank limited. Bangladesh Development Bank limited should concentrate on loan recovery that is necessary for long-term profitable and should concentrate on loan recovery that is necessary for long-term profitability. Without pross and cons everybody should to confess of BDBL contribution. We expect continue their operation without influence and contribute more and more to our industry that brings good luck to the nation.